International Entertainment News: Discovery Communications Reports Full Year and Fourth Quarter 2008 Results

Discovery Communications Reports Full Year and Fourth Quarter 2008 Results

Full Year 2008 Financial Highlights:

- Revenues increased to $3.44 billion - Adjusted OIBDA increased to $1.31 billion - Net income from continuing operations increased to $274 million - Free Cash Flow increased to $467 million

SILVER SPRING, Md., Feb. 25 /PRNewswire-FirstCall/ -- Discovery Communications, Inc. ("Discovery" or the "Company") (NASDAQ:DISCA)(NASDAQ:DISCB)(NASDAQ: DISCK) today reported financial results for the full year and fourth quarter ended December 31, 2008. The discussion below assumes the transaction between Discovery Holding Company ("DHC"), Discovery Communications Holding LLC ("DCH"), and Advance/Newhouse Programming Partnership that resulted in Discovery becoming a public company, as described in the Other Items section on page 5, occurred on January 1, 2007 and as such includes 100% of Discovery Communications' results for both 2008 and 2007. Please see the as adjusted financial statements beginning on page 14 for an explanation of why management believes this presentation is appropriate.

(Logo: http://www.newscom.com/cgi-bin/prnh/20080918/NETH035LOGO )

David Zaslav, Discovery's president and chief executive officer, said, "This past year was one of significant accomplishment for Discovery, as we delivered strong operating performances across our businesses and successfully transitioned to a fully public company. Strategically, we strengthened the programming and development at our fully distributed channels and finished the year with double digit ratings growth in the fourth quarter among key demos at Discovery Channel and TLC. We also established new identities for several of our emerging networks and continued our international expansion, increasing our subscriber base overseas by 16%. Most importantly, our strategic initiatives were achieved while strongly growing revenues and Adjusted OIBDA, in what are increasingly challenging times. As we execute our 2009 operating plan in a difficult economic climate, our stable foundation of contracted and growing subscription revenues, diversified international expansion and stringent focus on costs give us confidence that we will outperform the marketplace and continue to grow moving forward."

Fourth Quarter Results

Fourth quarter revenues of $904 million increased $1 million over the as adjusted(1) fourth quarter a year ago as 8% growth at U.S. Networks was mostly offset by a 23% decline in Commerce, Education and Other as well as a 4% decline at International Networks, primarily the result of a $33 million impact from foreign currency fluctuations. Adjusted Operating Income Before Depreciation and Amortization ("OIBDA") grew to $362 million, an increase of $222 million versus the fourth quarter a year ago, mainly driven by an increase of $188 million at U.S. Networks and an increase of $26 million, or 32%, at International Networks. The prior year results included a content impairment charge of $139 million, primarily at U.S. Networks. Excluding the impact of the content impairment charge, Adjusted OIBDA increased $64 million or 23% from the prior year. Adjusted OIBDA margin, excluding the impact of the content impairment charge, increased to 38% for the fourth quarter, up from 31% in the same period a year ago. Adjusted OIBDA is defined as revenue less (i) cost of revenues and selling, general and administrative expense excluding marked to market share-based compensation expense under our long-term incentive plans, (ii) restructuring and impairment charges, (iii) depreciation and amortization, including amortization of deferred launch incentives and (iv) gains on assets and business dispositions.

Fourth quarter net income from continuing operations of $105 million ($0.25 per share) grew $113 million versus the as adjusted(1) loss from continuing operations of $8 million ($0.03 per share) a year ago.

Free cash flow was $128 million for the fourth quarter, an increase of $24 million from the as adjusted(1) results in the same period for 2007. Free cash flow is defined as cash flows from operating activities less acquisitions of property and equipment.

Full Year Results

Full year 2008 revenues of $3,443 million increased 10% or $302 million over the as adjusted(1) revenues for 2007, primarily driven by 10% growth at U.S. Networks and 12% growth at International Networks. Adjusted OIBDA increased 49% to $1,310 million led by 37% growth at U.S. Networks and 52% growth at International Networks. The prior year results included a content impairment charge of $139 million, primarily at U.S. Networks. Excluding the impact of the content impairment charge, Adjusted OIBDA increased $216 million or 21% from the prior year and Adjusted OIBDA margin grew to 38% in 2008, up from 28% in 2007.

Full year net income from continuing operations of $274 million ($0.85 per share) grew $123 million versus the as adjusted results(1) of $151 million ($0.54 per share) a year ago. The increased results primarily reflect the higher Adjusted OIBDA as well as a $69 million benefit in the current year related to the unrealized change in the fair value of the marked to market share-based compensation, which was an expense of $141 million in the prior year.

Free cash flow was $467 million for 2008, an increase of $295 million from the as adjusted(1) results in 2007.

(1) See the as adjusted financial statements beginning on page 14 for
2007 results.

SEGMENT RESULTS
(dollars in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 Change 2008 2007 Change
(As adjusted) (As adjusted)

Revenues (1)(2)(3):
U.S. Networks $536 $498 8% $2,062 $1,879 10%
International
Networks 294 307 (4%) 1,158 1,030 12%
Commerce, Education,
and Other 70 91 (23%) 196 225 (13%)
Corporate 4 7 (43%) 27 7 286%
Total Revenues $904 $903 - $3,443 $3,141 10%

Adjusted OIBDA (1)(2)(3):
U.S. Networks $300 $112 168% $1,111 $810 37%
International
Networks 107 81 32% 387 254 52%
Commerce, Education,
and Other 11 - - 13 4 225%
Corporate (56) (53) 6% (201) (189) 6%
Total Adjusted OIBDA $362 $140 159% $1,310 $879 49%

(1) 2007 excludes Travel Channel results through its disposition on May
14, 2007. See the supplemental financial schedules on page 11 for
Travel Channel results.
(2) All results exclude the Discovery Channel Stores which ceased
operations in the third quarter of 2007 and have been treated as part
of discontinued operations.
(3) See the supplemental financial schedules on pages 12 to 18 for reconciliations of
Adjusted OIBDA to operating income as well as 2007 financial data to
previously reported results from Discovery Holding Company.

U.S. Networks
(dollars in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 Change 2008 2007 Change
(As adjusted) (As adjusted)
Revenues:
Distribution $236 $209 13% $927 $840 10%
Advertising 282 265 6% 1,058 975 9%
Other 18 24 (25%) 77 64 20%
Total Revenues $536 $498 8% $2,062 $1,879 10%

Adjusted OIBDA $300 $112 168% $1,111 $810 37%

Adjusted OIBDA
Margin 56% 22% 54% 43%

Fourth Quarter Results

U.S. Networks' revenue in the fourth quarter of 2008 increased 8% to $536 million primarily driven by distribution and advertising revenue growth. Distribution revenue grew 13% largely from higher rates across the fully distributed networks, subscriber growth at the emerging networks and lower launch-support amortization. Advertising revenue increased 6% from higher pricing as well as increased ratings at Discovery Channel and TLC, which satisfied prior period ratings shortfalls.

Adjusted OIBDA increased $188 million to $300 million reflecting the 8% revenue growth and lower operating expenses, primarily due to the impairment charge of $129 million taken in the fourth quarter a year ago, which also resulted in a $19 million decline in content amortization expense in the current quarter as compared to prior year. Excluding the impact of the impairment charge taken a year ago, programming expense increased $16 million and Adjusted OIBDA grew $40 million or 17%.

Full Year Results

U.S. Networks' revenue for the full year 2008 increased 10% to $2,062 million mainly driven by distribution and advertising revenue growth. Distribution revenue grew 10% largely from higher rates across the fully distributed networks, subscriber growth at the emerging networks and lower launch-support amortization. 2008 distribution revenues also include $8 million of one-time revenue related to accruals in prior periods for certain distributors. Advertising revenue increased 9% as compared with 2007 as a result of pricing and higher sellouts, partially offset by lower ratings at TLC and Discovery Channel. Additionally, other revenue grew 20% reflecting Discovery's sales representation of Travel Channel and an increase in digital revenue, primarily from the inclusion of HowStuffWorks, which was acquired in December 2007.

Adjusted OIBDA increased 37% to $1,111 million reflecting the 10% revenue growth and 12% lower operating expenses, primarily due to the content impairment charge of $129 million taken in the fourth quarter of 2007, which also resulted in a $76 million decline in content amortization expense in the current year as compared to the prior year. Excluding the impact of the impairment charge taken a year ago, programming expense increased $49 million and Adjusted OIBDA grew $96 million or 10%. Full year results also include a content impairment charge of $17 million related to the management team reorganization at TLC during the third quarter of 2008.

International Networks

(dollars in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 Change 2008 2007 Change
(As adjusted) (As adjusted)
Revenues:
Distribution $165 $168 (2%) $713 $615 16%
Advertising 99 112 (12%) 336 330 2%
Other 30 27 11% 109 85 28%
Total Revenues $294 $307 (4%) $1,158 $1,030 12%

Adjusted OIBDA $107 $81 32% $387 $254 52%

Adjusted OIBDA Margin 36% 26% 33% 25%

Fourth Quarter Results

International Networks' revenue for the fourth quarter decreased 4% to $294 million as the $33 million impact of foreign currency fluctuations resulted in a 2% decline in distribution revenue and a 12% decline in advertising revenue. Excluding the impact of foreign currency fluctuations, revenues increased 6% led by 8% affiliate revenue growth, primarily from subscriber increases in EMEA (Europe (excluding U.K.), Middle East and Africa) and Latin America. Advertising revenue in local currency terms was flat as strong growth in EMEA and Latin America was offset by lower advertising revenue in the U.K. due to lower rates as well as the interpretation of a contract provision resulting in a limitation in our ability to monetize our audience. Excluding the U.K., advertising revenue in local currency terms increased 14% over the fourth quarter a year ago at International Networks.

Adjusted OIBDA increased 32% to $107 million as the 4% revenue decline was more than offset by an 18% decline in operating expenses. Excluding the impact of foreign currency, Adjusted OIBDA increased 36% reflecting 6% revenue growth and a 4% decline in operating expenses as increased programming expenses were more than offset by lower marketing and research costs.

Full Year Results

International Networks' revenue for the full year 2008 increased 12% to $1,158 million led by 16% distribution revenue growth primarily from subscriber increases in EMEA (Europe (excluding U.K.), Middle East and Africa) and Latin America. Advertising revenue increased 2% as strong growth in EMEA and Latin America was offset by lower advertising revenue in the U.K. due to lower rates as well as an interpretation of a contract provision. Excluding the U.K., advertising revenue in local currency terms increased 22% over 2008 at International Networks. The full year also included 28% growth in other revenue driven by the sale of Discovery Networks programs in the U.K. and Canada.

Adjusted OIBDA increased 52% to $387 million reflecting the 12% revenue growth and a 1% decline in operating expenses as lower marketing and research costs were mostly offset by increased programming and personnel costs. Excluding foreign currency fluctuations, revenues increased 12% and Adjusted OIBDA increased 45% versus 2007. The full year impact of foreign currency increased revenues by $7 million and Adjusted OIBDA by $17 million.

Commerce, Education, and Other

(dollars in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 Change 2008 2007 Change
(As adjusted) (As adjusted)
Revenues $70 $91 (23%) $196 $225 (13%)
Adjusted OIBDA $11 $- - $13 $4 225%

Adjusted OIBDA Margin 16% -% 7% 2%

Fourth Quarter Results

Commerce, Education and Other fourth quarter revenue decreased 23% to $70 million primarily reflecting lower commerce revenues as compared to the same period a year ago, which included stronger DVD sales of Planet Earth. Adjusted OIBDA increased to $11 million as compared with the break even results in the fourth quarter a year ago as the revenue decline at commerce was mostly offset by lower operating costs as compared to prior year. Additionally, prior year results included an impairment charge of $10 million at education. The current quarter results also include revenues of $20 million and Adjusted OIBDA of $1 million for Creative Sound Services which was flat with the results a year ago.

Full Year Results

Commerce, Education and Other full year 2008 revenue decreased 13% to $196 million primarily reflecting lower commerce revenues as compared to the same period a year ago, which included stronger DVD sales of Planet Earth, partially offset by higher education revenues from the streaming of new products as well as assessment, sponsorship and licensing deals. Adjusted OIBDA increased $9 million to $13 million as the revenue decline was offset by lower operating costs, primarily at education, due to an impairment charge of $10 million in the prior year,. The current year results include revenues of $75 million and Adjusted OIBDA of $4 million for Creative Sound Services, which was flat with the results a year ago.

Corporate

For the full year 2008 Adjusted OIBDA decreased $12 million as a result of an increase in Corporate expenses, primarily due to costs associated with the transaction described in Other Items as well as costs related to the OWN joint venture.

OTHER ITEMS

In September 2008, Discovery Holding Company, Inc. ("DHC") and Advance/Newhouse Programming Partnership ("Advance/Newhouse") closed a transaction that included the combination of DHC's approximate 67% interest in Discovery Communications Holding, LLC ("DCH") with Advance/Newhouse's approximate 33% interest in DCH. In connection with the transaction, DHC spun-off its interests in Ascent Media Corporation except for certain businesses that provide sound-related services, which remain with Discovery. As a result of the transaction, DHC ceased to be a reporting company and Discovery became the successor reporting entity to DHC. The attached consolidated statements of operations, consolidated balance sheets and consolidated statements of cash flows assume the above transaction occurred as of January 1, 2008, in accordance with generally accepted accounting principles (GAAP). The prior year results included in the attached financial statements reflect the previously reported results of DHC, which accounted for its interest in DCH in equity in earnings of unconsolidated affiliates. Additionally, the results of Ascent Media Corporation with the exception of the Creative Sound Services business have been treated as discontinued operations for 2008 and 2007. See our Form 10-K filed with the Securities and Exchange Commission on February 25, 2009 for a more detailed description of the transaction and for further explanation of the financial statement presentation. See the supplemental financial schedules beginning on page 14 for a reconciliation of DHC's previously reported results to as adjusted financial statements for 2007.

FULL YEAR 2009 OUTLOOK

For the full year ended December 31, 2009, Discovery Communications expects total revenue between $3,375 million and $3,500 million, Adjusted OIBDA between $1,300 million and $1,400 million and net income from continuing operations of $475 million to $575 million. Our outlook incorporates current foreign exchange rates for revenues and expenses and current share price for marked to market equity based compensation calculations while excluding the impact of OWN. It is expected that $70 to $80 million will be invested in OWN in 2009 but the income statement impact will depend on the timing of the launch.

NON-GAAP FINANCIAL MEASURES

Adjusted OIBDA and Free Cash Flow

In addition to the results prepared in accordance with GAAP provided in this release, the Company has presented Adjusted OIBDA and free cash flow. The Company defines Adjusted OIBDA as revenue less (i) cost of revenues and selling, general and administrative expense excluding marked to market share-based compensation expense under our long-term incentive plans, (ii) restructuring and impairment charges, (iii) amortization of deferred launch incentives, and (iv) gain on asset and business dispositions. The Company excludes share-based compensation under long-term incentive plans due to its significant volatility from being marked-to-market. The Company excludes the amortization of deferred launch incentive payments because these payments are infrequent and the amortization does not represent cash payments in the current reporting period. In addition to these items, Adjusted OIBDA also excludes depreciation and amortization, restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Management uses Adjusted OIBDA to assess the operational strength and performance of its operating segments, as well as the Company as a whole, and to view operating results, perform analytical comparisons, identify strategies to improve performance and allocate resources to each operating segment. The Company believes Adjusted OIBDA is an important measure to investors because it allows them to analyze operating performance of each business and the Company overall using the same metric management uses and provides investors a measure to analyze operating performance of each business division and the Company overall against historical data.

The Company defines free cash flow as cash provided by operations less acquisitions of property and equipment. The Company uses free cash flow as it believes it is an important indicator for management and investors of the Company's liquidity, including its ability to reduce debt, make strategic investments and return capital to shareholders.

Since Adjusted OIBDA and free cash flow are non-GAAP measures, they should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance reported in accordance with GAAP. Please review the supplemental financial schedules beginning on page 11 for reconciliations to GAAP measures.

2007 Results

See page 14 for an explanation of how as adjusted results for 2007 have been calculated and why management believes this presentation would be meaningful to investors.

Travel Channel

The Company presents 2007 results without the Travel Channel, which was exchanged on May 14, 2007. See our Form 10-K filed with the Securities and Exchange Commission on February 25, 2009 for a more detailed description of this transaction. Management believes this presentation is useful to investors because it allows them to analyze operating performance of the U.S. Networks and total company against comparable historical data. See page 11 for reconciliation to results including Travel Channel.

Conference Call Information

Discovery Communications will host a conference call today at 8:30 a.m. EST to discuss its full year and fourth quarter 2008 results. To listen to the call, visit http://www.discoverycommunications.com/.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to the Company as of the date hereof, and the Company's actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Annual Report on Form 10-K filed with the SEC on February 25, 2009. Forward-looking statements include statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future, and can be identified by forward-looking words such as "anticipate," "believe," "could,", "continue," "estimate," "expect," "intend," "may," "should," "will" and "would" or similar words. Forward-looking statements in this release include, without limitation, the full year 2009 outlook. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

DISCOVERY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; amounts in millions, except per share amounts)

Three Months Twelve Months
Ended Ended
December 31, December 31,
2008 2007(a) 2008 2007(a)
Revenues:
Distribution $401 $- $1,640 $-
Advertising 382 - 1,396 -
Other 121 17 407 76

Total revenues 904 17 3,443 76

Operating costs and expenses:
Cost of revenues, excluding
depreciation and amortization
listed below 266 16 1,024 60
Selling, general and
administrative 270 5 1,115 22
Depreciation and
amortization 40 1 186 3
Impairment of intangible
assets 30 - 30 -
Exit and restructuring charges 14 - 31 -
Gains on asset dispositions - (1) - (1)

Total operating costs and expenses 620 21 2,386 84

Operating income (loss) 284 (4) 1,057 (8)

Other (expense) income:
Equity in (loss) earnings of
Discovery Communications
Holding, LLC - (16) - 142
Equity in loss of
unconsolidated affiliates (59) - (61) -
Interest expense, net (60) - (256) -
Other, net 16 2 14 8

Total other (expense) income, net (103) (14) (303) 150

Income (loss) from
continuing operations
before income taxes and
minority interests 181 (18) 754 142

(Provision for) benefit from
income taxes (67) 6 (352) (56)
Minority interests, net of tax (9) - (128) -

Income (loss) from
continuing operations 105 (12) 274 86

Income (loss) from discontinued
operations, net of tax 1 (158) 43 (154)

Net income (loss) $106 $(170) $317 $(68)

Income (loss) per share from
continuing operations:
Basic $0.25 $(0.04) $0.85 $0.31
Diluted $0.25 $(0.04) $0.85 $0.31
(Loss) income per share from
discontinued operations:
Basic $- $(0.56) $0.13 $(0.55)
Diluted $- $(0.56) $0.13 $(0.55)

Net income (loss) per share:
Basic $0.25 $(0.60) $0.99 $(0.24)
Diluted $0.25 $(0.60) $0.98 $(0.24)

Weighted average number of
shares outstanding:
Basic 422 281 321 281
Diluted 422 281 322 281

(a) The 2007 results presented are on a GAAP basis and are those of our
predecessor, Discovery Holding Company, which accounted for its
investment in DCH using the equity method. See page 15 for the as
adjusted statement of operations for the three months ended December
31, 2007 and page 16 for the as adjusted statement of operations for
the twelve months ended December 31, 2007.

DISCOVERY COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in millions)

As of December 31,
ASSETS 2008 2007(a)
Current assets:
Cash and cash equivalents $100 $8
Receivables, net 780 10
Content rights, net 73 -
Deferred income taxes 49 -
Prepaid expenses and other current assets 107 2
Assets of discontinued operations - 352
Total current assets 1,109 372

Investment in Discovery Communications Holding, LLC - 3,272
Noncurrent content rights, net 1,163 -
Property and equipment, net 395 5
Goodwill 6,891 1,782
Intangible assets, net 716 1
Other noncurrent assets 210 -
Assets of discontinued operations - 434
Total assets $10,484 $5,866

LIABILITIES, REDEEMABLE INTERESTS
IN SUBSIDIARIES, AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $71 $1
Accrued liabilities 350 5
Deferred revenues 93 -
Current portion of long-term
incentive plan liability 8 -
Current portion of long-term
debt 458 -
Other current liabilities 90 2
Liabilities of discontinued
operations - 112
Total current liabilities 1,070 120

Long-term incentive plan
liability 15 -
Long-term debt 3,331 -
Deferred income taxes 246 1,227
Other noncurrent liabilities 237 1
Liabilities of discontinued
operations - 23
Total liabilities 4,899 1,371

Commitments and contingencies - -
Redeemable interests in
subsidiaries 49 -

Stockholders' equity:
Preferred stock 2 -
Common stock 3 3
Additional paid-in capital 6,545 5,728
Accumulated deficit (936) (1,253)
Accumulated other
comprehensive (loss) income (78) 17

Total stockholders' equity 5,536 4,495
Total liabilities, redeemable
interests in subsidiaries,
and stockholders' equity $10,484 $5,866

DISCOVERY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in millions)

Twelve Months Ended
December 31,
2008 2007(a)
Operating activities
Net income (loss) $317 $(68)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Share-based compensation (benefit) expense (66) 1
Depreciation and amortization 232 68
Impairment of goodwill - 165
Impairment of intangible assets 30 -
Gains on asset dispositions (76) (1)
Equity in earnings of Discovery Communications
Holding, LLC - (142)
Equity in loss of unconsolidated affiliates 61 -
Deferred income taxes 190 56
Minority interests, net of tax 128 -
Other non cash expenses (income), net 69 (8)
Changes in operating assets and liabilities, net of
discontinued operations:
Receivables, net (45) 4
Content rights, net (145) -
Accounts payable and accrued liabilities (46) (11)
Other, net (80) (6)
Cash provided by operating activities 569 58

Investing activities
Purchases of property and equipment (102) (47)
Proceeds from business and asset dispositions 139 2
Net cash acquired from Newhouse Transaction 45 -
Business acquisitions, net of cash acquired (8) -
Proceeds from sale of securities 24 28
Other investing activities, net - 2
Cash provided by (used in) investing activities 98 (15)

Financing activities
Ascent Media Corporation spin-off (356) -
Net repayments of revolver loans (125) -
Principal repayments of long-term debt (257) -
Principal repayments of capital lease obligations (29) -
Net cash from stock option exercises - 13
Other financing activities, net (7) (1)

Cash (used in) provided by financing activities (774) 12

Effect of exchange rate changes on cash and cash
equivalents (2) -

Change in cash and cash equivalents (109) 55
Cash and cash equivalents of continuing operations,
beginning of period 8 1
Cash and cash equivalents of discontinued operations,
beginning of period 201 153
Cash and cash equivalents, end of period $100 $209

(a) The 2007 results presented are on a GAAP basis and are those of our
predecessor, Discovery Holding Company, which accounted for its
investment in DCH using the equity method. See page 18 for the
twelve months ended December 31, 2007 as adjusted statement of cash
flows.

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF TRAVEL CHANNEL RESULTS
(unaudited; amounts in millions)

Twelve Months Ended December 31, 2007(a)
U.S. Networks Excluding Travel U.S. Networks Including
Travel Channel Channel Travel Channel
Revenues:
Distribution $840 $22 $862
Advertising 975 40 1,015
Other 64 - 64
Total Revenues $1,879 $62 $1,941

Adjusted OIBDA $810 $20 $830

Twelve Months Ended December 31, 2007(a)
Total Company Excluding Travel Total Company Including
Travel Channel Channel Travel Channel
Revenues:
Distribution $1,455 $22 $1,477
Advertising 1,305 40 1,345
Other 381 - 381
Total Revenues $3,141 $62 $3,203

Adjusted OIBDA $879 $20 $899

(a) The 2007 results presented are as adjusted. See page 14 for an
explanation of how these results have been calculated and why
management believes this presentation would be meaningful to
investors.

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
(unaudited; amounts in millions)

Three Months Ended December 31, 2008
Adjusted
Operating Marked
Income to
Before Amortization Market
Depreciation Depreciation of Cable Share-
and and Distribution Based Other Operating
Amortization Amortization Investments Compensation (b) Income

U.S.
Networks $300 $(16) $(8) $(4) $(38) $234
Inter-
national
Networks 107 (11) (8) - (2) 86
Commerce,
Education,
and Other 11 (2) - - (2) 7
Corporate (56) (11) - 26 (2) (43)
Total $362 $(40) $(16) $22 $(44) $284

Three Months Ended December 31, 2007(a)
Adjusted
Operating Marked
Income to
Before Amortization Market
Depreciation Depreciation of Cable Share-
and and Distribution Based Other Operating
Amortization Amortization Investments Compensation (c) Income

U.S.
Networks $112 $(9) $(14) $- $- $89
Inter-
national
Networks 81 (10) (11) - (2) 58
Commerce,
Education,
and Other - (4) - - (1) (5)
Corporate (53) (14) - (11) - (78)
Total $140 $(37) $(25) $(11) $(3) $64

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
(unaudited; amounts in millions)

Twelve Months Ended December 31, 2008
Adjusted
Operating Marked
Income to
Before Amortization Market
Depreciation Depreciation of Cable Share-
and and Distribution Based Other Operating
Amortization Amortization Investments Compensation (b) Income

U.S.
Networks $1,111 $(56) $(34) $(4) (51) $966
Inter-
national
Networks 387 (43) (41) - (2) 301
Commerce,
Education,
and Other 13 (9) - - (6) (2)
Corporate (201) (78) - 73 (2) (208)
Total $1,310 $(186) $(75) $69 (61) $1,057

Twelve Months Ended December 31, 2007(a)
Adjusted
Operating Marked
Income to
Before Amortization Market
Depreciation Depreciation of Cable Share-
and and Distribution Based Other Operating
Amortization Amortization Investments Compensation (c) Income
U.S.
Networks $830 $(28) $(56) $- $- $746
Inter-
national
Networks 254 (36) (44) - (2) 172
Commerce,
Education,
and Other 4 (17) - - (27) (40)
Corporate (189) (53) - (141) 119 (264)
Total $899 $(134) $(100) $(141) $90 $614

(a) The 2007 results presented are as adjusted and include Travel Channel
results. See page 14 for an explanation of how these results have
been calculated and why management believes this presentation would
be meaningful to investors.
(b) For the twelve months ended December 31, 2008, Other at U.S. Networks
includes write-offs of intangible assets as well as costs related to
employee relocation and termination of a production agreement.
Commerce, Education, and Other includes costs related to closure of
Commerce's distribution center and stores headquarter offices.
(c) For the twelve months ended December 31, 2007, Other at Commerce,
Education, and Other includes write-offs of intangible assets.
Corporate represents a gain on the disposition of a business offset
by costs related to employee terminations due to a number of
organizational and strategic adjustments.

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
AS ADJUSTED FINANCIAL RESULTS
(unaudited; amounts in millions)

The following as adjusted financial statements assume the transactions between DHC, DCH and Advance/Newhouse were completed as of January 1, 2007. The as adjusted results do not purport to be indicative of the results that would have been obtained if these events had been completed by January 1, 2007. See our Form 10-K filed with the Securities and Exchange Commission on February 25, 2009 for a more detailed description of the transaction and for further explanation of the financial statement presentation.

The as adjusted financial statements for 2007 have not been prepared in accordance with GAAP. Management believes that this presentation is meaningful to investors, because it presents the results of Discovery, the reporting successor to DHC. Discovery will be the reporting entity going forward and a comparison of DHC's results for 2007 to Discovery's results for 2008 would not provide investors with meaningful information regarding changes in financial performance of Discovery from 2007 to 2008.

The information in the DHC historical and DCH historical columns in the following as adjusted financial statements is derived from the historical financial statements of DHC and Discovery Communications, Holding, LLC, respectively. Certain reclassifications, with no impact to operating income, have been made to the 2007 financial information to conform to the 2008 presentation.

DISCOVERY COMMUNICATIONS, INC.
RECONCILIATION OF DISCOVERY HOLDING COMPANY HISTORICAL
TO DISCOVERY COMMUNICATIONS, INC.
(unaudited; amounts in millions, except per share amounts)

Three Months Ended December 31, 2007
Less:
Add: Minority Discovery
DHC DCH Interest As
Historical(a) Historical Adjustment Adjusted
Revenues:
Distribution $- $377 $- $377
Advertising - 377 - 377
Other 17 132 - 149
Total revenues 17 886 - 903

Operating costs and expenses:
Cost of revenues, excluding
depreciation and
amortization listed below 16 431 - 447
Selling, general and
administrative 5 347 - 352
Depreciation and amortization 1 36 - 37
Exit and restructuring charges - 4 - 4
Gains on asset dispositions (1) - - (1)
Total operating costs and expenses 21 818 - 839

Operating (loss) income (4) 68 - 64
Other (expense) income:
Equity in loss of Discovery
Communications
Holding, LLC (16) - 16 (b) -
Equity in earnings of
unconsolidated affiliates - 3 - 3
Interest expense, net - (70) - (70)
Other, net 2 (12) - (10)
Total other expense, net (14) (79) 16 (77)

Loss from continuing operations
before income taxes and minority
interests (18) (11) 16 (13)

Benefit from (provision for)
income taxes 6 (3) - 3
Minority interests, net of tax - (6) 8 (c) 2

Loss from continuing operations (12) (20) 24 (8)

Loss from discontinued operations (158) (4) - (162)

Net loss $(170) $(24) $24 $(170)

Loss per share from continuing
operations, basic and diluted $(0.04) $(0.03)
Loss per share from discontinued
operations, basic and diluted $(0.56) $(0.58)
Net loss per share, basic and
diluted $(0.60) $(0.61)
Weighted average number of shares
outstanding, basic and diluted
281 281

(a) DHC results of operations include DHC corporate costs and the
results of Creative Sound Services, with the results of Ascent
Media Corporation recorded as discontinued operations.
(b) Represents the elimination of DHC's historical share of earnings
of DCH for the three months ended December 31, 2007.
(c) Represents the minority interest expense for the proportion of
DCH's historical share of earnings not recognized by DHC for the
three months ended December 31, 2007.

DISCOVERY COMMUNICATIONS, INC.
RECONCILIATION OF DISCOVERY HOLDING COMPANY HISTORICAL
TO DISCOVERY COMMUNICATIONS, INC.
(unaudited; amounts in millions, except per share amounts)

Twelve Months Ended December 31, 2007

Less:
Add: Minority Discovery
DHC DCH Interest As
Historical(a) Historical Adjustment Adjusted
Revenues:
Distribution $- $1,477 $- $1,477
Advertising - 1,345 - 1,345
Other 76 305 - 381
Total revenues 76 3,127 - 3,203

Operating costs and expenses:
Cost of revenues, excluding 60 1,167 - 1,227
depreciation and amortization
listed below
Selling, general and 22 1,296 - 1,318
administrative
Depreciation and amortization 3 131 - 134
Asset impairment - 26 - 26
Exit and restructuring charges - 20 - 20
Gains on asset and business
dispositions (1) (135) - (136)
Total operating costs and
expenses 84 2,505 - 2,589

Operating (loss) income (8) 622 - 614

Other income (expense):
Equity in earnings of Discovery
Communications Holding, LLC 142 - (142)(b) -
Equity in earnings of
unconsolidated affiliates - 9 - 9
Interest expense, net - (249) - (249)
Other, net 8 (10) - (2)

Total other income (expense),
net 150 (250) (142) (242)

Income from continuing
operations before income
taxes and minority interests 142 372 (142) 372

Provision for income taxes (56) (77) - (133)
Minority interests, net of tax - (8) (80)(c) (88)

Income from continuing operations 86 287 (222) 151

Loss from discontinued operations,
net of tax (154) (65) - (219)

Net (loss) income $(68) $222 $(222) $(68)

Income per share from
continuing operations,
basic and diluted $0.31 $0.54
Loss per share from
discontinued operations,
basic and diluted $(0.55) $(0.78)
Net loss per share,
basic and diluted $(0.24) $(0.24)
Weighted average number of
shares outstanding, basic
and diluted 281 281

(a) DHC results of operations include DHC corporate cost and the
results of Creative Sound Services, while the results of Ascent
Media Corporation are included in net loss from discontinued
operations.
(b) Represents the elimination of DHC's historical share of earnings
of DCH for the twelve months ended December 31, 2007.
(c) Represents the minority interest expense for the proportion of DCH's
historical share of earnings not recognized by DHC for the twelve
months ended December 31, 2007.

DISCOVERY COMMUNICATIONS, INC.
RECONCILIATION OF DISCOVERY HOLDING COMPANY HISTORICAL
TO DISCOVERY COMMUNICATIONS, INC.
(unaudited; amounts in millions)

As of December 31, 2007
Add: Less: Other
DHC DCH Adjustments Discovery,
Historical Historical (a) As adjusted
ASSETS
Current assets:
Cash and cash
equivalents $8 $45 $- $53
Receivables, net 10 742 - 752
Content rights, net - 79 - 79
Deferred income taxes - 104 - 104
Prepaid expenses and
other current assets 2 107 - 109
Assets of discontinued
operations 352 - (352) -
Total current assets 372 1,077 (352) 1,097

Investment in Discovery
Communications Holding,
LLC 3,272 - (3,272) -
Investments - 101 - 101
Noncurrent content rights,
net - 1,048 46 1,094
Property and equipment, net 5 397 - 402
Goodwill 1,782 4,870 475 7,127
Intangible assets, net 1 182 277 460
Other noncurrent assets - 285 - 285
Assets of discontinued
operations 434 - (434) -
Total assets $5,866 $7,960 $(3,260) $10,566

LIABILITIES, REDEEMABLE
INTERESTS IN SUBSIDIARIES,
AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1 $98 $- $99
Accrued liabilities 5 435 - 440
Deferred revenues - 78 - 78
Current portion of
long-term incentive
plan liability - 141 - 141
Current portion of
long-term debt - 32 - 32
Other current liabilities 2 66 115 183
Liabilities of discontinued
operations 112 - (112) -
Total current liabilities 120 850 3 973

Long-term debt - 4,109 - 4,109
Deferred income taxes 1,227 11 (1,106) 132
Other noncurrent
liabilities 1 233 - 234
Liabilities of discontinued
operations 23 - (23) -
Total liabilities 1,371 5,203 (1,126) 5,448

Commitments and
contingencies - - - -
Redeemable interests in
subsidiaries - 49 - 49

Stockholders' equity:
Common stock 3 - - 3
Members' equity - 2,533 (2,533) -
Additional paid-in
capital 5,728 - 586 6,314
Accumulated deficit (1,253) 185 (185) (1,253)
Accumulated other
comprehensive income
(loss) 17 (10) (2) 5
Total stockholders'
equity 4,495 2,708 (2,134) 5,069
Total liabilities,
redeemable interests in
subsidiaries, and
stockholders' equity $5,866 $7,960 $(3,260) $10,566

(a) Represents elimination of Ascent Media Corporation, excluding
Creative Sound Services, as well as DHC's historical investment
in DCH.

DISCOVERY COMMUNICATIONS, INC.
RECONCILIATION OF DISCOVERY HOLDING COMPANY HISTORICAL
TO DISCOVERY COMMUNICATIONS, INC.
(unaudited; amounts in millions)

Twelve Months Ended December 31, 2007
DHC As Discovery
reported DCH As adjusted
Operating activities
Net loss $(68) $- $(68)
Adjustments to reconcile
net loss to
cash provided by
operating activities 139 459 598
Changes in operating
assets and liabilities,
net of discontinued
operations (13) (217) (230)
Cash provided by
operating activities 58 242 300

Investing activities
Purchases of property and
equipment (47) (81) (128)
Proceeds from asset
dispositions 2 - 2
Business acquisitions,
net of cash acquired - (306) (306)
Proceeds from sale of
securities 28 - 28
Other investing
activities, net 2 (44) (42)
Cash used in investing
activities (15) (431) (446)

Financing activities
Borrowings from long-term
debt - 1,500 1,500
Net repayments of revolver
loans - (2) (2)
Principal repayments of
long-term debt - (8) (8)
Principal repayments of
capital lease
obligations - (6) (6)
Repurchase of members'
interests - (1,285) (1,285)
Net cash from stock
option exercises 13 - 13
Other financing
activities, net (1) (24) (25)
Cash provided by
financing activities 12 175 187

Effect of exchange rate
changes on cash and cash
equivalents - 7 7

Change in cash and cash
equivalents 55 (7) 48
Cash and cash equivalents
of discontinued
operations, beginning of
period 153 - 153
Cash and cash equivalents
of continuing
operations, beginning of
period 1 52 53
Adjustment to remove AMC
cash (201) - (201)
Cash and cash
equivalents, end of
period $8 $45 $53

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited; amounts in millions)

CALCULATION OF FREE CASH FLOW

Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007(a) Change 2008 2007(a) Change
Cash provided by
Operating activities $146 $141 $5 $569 $300 $269
Acquisition of property
and equipment (18) (37) 19 (102) (128) 26
Free cash flow $128 $104 $24 $467 $172 $295

RECONCILIATION OF 2009 OUTLOOK TO GAAP MEASURES

Full Year 2009
Net income from continuing operation $475 To $575
Interest, net 260 To 230
Depreciation and amortization 175 To 170
Other, including amortization of cable
distribution investments, marked to market
equity based compensation, restructuring
costs, equity earnings in unconsolidated
affiliates, unrealized and realized gains and
losses from derivatives, income tax expense,
minority interests in consolidated
subsidiaries 390 To 425
Adjusted OIBDA $1,300 To $1,400

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; amounts in millions)

BORROWINGS
As of
December 31, 2008

$1.0 billion Term Loan A, due quarterly to October 2010 $938
$1.6 billion Revolving Loan, due October 2010 315
$1.5 billion Term Loan B, due quarterly September
2007 to May 2014 1,478
7.45% Senior Notes, semi-annual interest, due
September 2009 55
8.37% Senior Notes, semi-annual interest, due
March 2011 220
8.13% Senior Notes, semi-annual interest, due
September 2012 235
Floating Rate Senior Notes (3.3% at December 31, 2008), semi-annual
interest,
Due December 2012 90
6.01% Senior Notes, semi-annual interest, due
December 2015 390
Obligations under capital leases 67
Other notes payable 1
Subtotal 3,789
Current portion (458)
Total long-term debt 3,331
Cash and cash equivalents 100
Net debt $3,231

SHARE-BASED COMPENSATION
As of January 31, 2009
Total Weighted Vested Weighted
Units Average Units Average
Long-Term Outstanding Exercise Outstanding Exercise
Incentive Plans (in millions) Price (in millions) Price

Discovery appreciation plan 20 18.77 - -

Stock appreciation rights
Vesting in March 2009 3 14.40 - -
Vesting in March 2010 3 14.40 - -

Stock options 11 14.48 3 13.87
Total share-based
compensation plans 37 16.79 3 13.87

Photo: http://www.newscom.com/cgi-bin/prnh/20080918/NETH035LOGO
Source: Discovery Communications, Inc.

CONTACT: Corporate Communications, Michelle Russo, +1-240-662-2901,
michelle_russo@discovery.com; Investor Relations, Craig Felenstein,
+1-212-548-5109, craig_felenstein@discovery.com

Web Site: http://www.discovery.com/

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Profile: intent

International Entertainment News

Wednesday, February 25, 2009

Discovery Communications Reports Full Year and Fourth Quarter 2008 Results

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